$ES #triple three #five wave down
In this weekend report we will discuss the big picture including targets for that decline and potential paths how we can get to the targets. Finally, I will explain what scenario I prefer and why.
This is our primary bearish macro account:
I count the decline off the top made in Jan’2022 s a three wave structure. First we got a large wave (A) down that bottomed in June 2022. Then we got a huge wave (B) up that topped in early Feb’23. Therefore we are left with one more wave down to be labelled ( C ) down targeting a new lower low under the low made in Oct’22.
Note that both, wave (A) down and wave (B) up subdivided into three waves of smaller size. The traditional Elliott wave theory recognizes two types of corrective patterns.
(1) 3-3-5 corrective structure:
Below is an example of that structure played out by S&P 500 index in 2021:
The “3-3-3” structure expects each wave in a three wave down move to subdivide into a three wave structure of a smaller size. That means that the final push down would be structured as a three wave down move where each subwave would most likely be composed of another three wave structure. We call that structure “complex” or “Double Three” because its a weird combination of many small a-b-c fractals that once put together compose a large (w) down, (x) up, (y) down structure.
f we apply that fractal to the current daily chart of ES-mini we can place the Friday close somewhere here:
I personally favor that scenario because the widely accepted five wave down structures have been very uncommon over recent years. Just come back to 2022 and try to find any clean five wave down structure. Once Ian Copsey, a founder of the Harmonic Elliott Wave theory questioned validity of the “3-3-5” corrective structure.
For example that same fractal in S&P 500 from 2021 looks better counted if we apply that Double Three corrective structure instead of a five wave down structure:
Those paths look very similar in a sense that both lead ES-mini futures to mush lower levels. Yet there are important differences for traders.
In a classic widely recognized five wave down structure the strongest decline is a wave iii down which is located in the middle of a five wave down move. The final move down in a wave v may be detected by a positive divergence in oscillators because that final push down is shorter than the preceding strongest move down in a wave iii.
In contrast, in a complex Double Three corrective structure, the final decline in subwave -y- of (y) is much stronger than the first subwave -w- down:
A wave -y- down goes to 138.2% or 176.4% ext of a wave -w- down.
A wave (y) down goes to 138.2% or 176.4% ext of a wave (w) down:
Note that in that structure
- the subwave c of a wave -w- was a stronger drop than subwave a of a wave -w-, and
- the subwave a of a wave -y- was a stronger drop than subwave c of a wave -w-, and
- the subwave c of a wave -y- was a stronger drop than subwave a of a wave -y-.
You can see that every new push down was stronger than the preceding one and the whole structure was completed with a climatic panic drop in a subwave c of wave -y- of (y) down.
Now you better understand what to expect from ES-mini on the way down if it keeps following my preferred path: